As of today (2024-05-05), Applied Micro Circuits's weighted average cost of capital is 10.5%%. Applied Micro Circuits's ROIC % is 0.00% (calculated using TTM income statement data).
Applied Micro Circuits earns returns that do not match up to its cost of capital. It will destroy value as it grows.
*Note: The beta of this company cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
For a comprehensive WACC calculation, please access the WACC Calculator.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Competitive Comparison of Applied Micro Circuits's WACC %
For the Semiconductors subindustry, Applied Micro Circuits's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.
Applied Micro Circuits's WACC % Distribution in the Semiconductors Industry
For the Semiconductors industry and Technology sector, Applied Micro Circuits's WACC % distribution charts can be found below:
* The bar in red indicates where Applied Micro Circuits's WACC % falls into.
Applied Micro Circuits WACC % Calculation
The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.
WACC
=
E
/
(E + D)
*
Cost of Equity
+
D
/
(E + D)
*
Cost of Debt
*
(1 - Tax Rate)
1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Applied Micro Circuits's market capitalization (E) is $740.570 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Sep. 2016, Applied Micro Circuits's latest one-year quarterly average Book Value of Debt (D) is $0 Mil.
a) weight of equity = E / (E + D) = 740.570 / (740.570 + 0) = 1
b) weight of debt = D / (E + D) = 0 / (740.570 + 0) = 0
2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 4.497%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. Applied Micro Circuits's beta cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 4.497% + 1 * 6% = 10.497%
3. Cost of Debt:
GuruFocus uses latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
As of Sep. 2016, Applied Micro Circuits's interest expense (positive number) was $1.345 Mil. Its total Book Value of Debt (D) is $0 Mil.
Cost of Debt = 1.345 / 0 = %.
4. Multiply by one minus TTM Tax Rate:
GuruFocus uses the most recent TTM Tax Expense divided by the most recent TTM Pre-Tax Income to calculate the tax rate. The calculated TTM tax rate is limited to between 0% and 100%. If the calculated tax rate is higher than 100%, it is set to 100%. If the calculated tax rate is less than 0%, it is set to 0%.
The latest calculated TTM Tax Rate = 0.535 / -31.75 = -1.69%, which is less than 0%. Therefore it's set to 0%.
Applied Micro Circuits's Weighted Average Cost Of Capital (WACC) for Today is calculated as:
WACC
=
E / (E + D)
*
Cost of Equity
+
D / (E + D)
*
Cost of Debt
*
(1 - Tax Rate)
=
1
*
10.497%
+
0
*
%
*
(1 - 0%)
=
10.5%
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.
As of today, Applied Micro Circuits's weighted average cost of capital is 10.5%%. Applied Micro Circuits's ROIC % is 0.00% (calculated using TTM income statement data).
Applied Micro Circuits earns returns that do not match up to its cost of capital. It will destroy value as it grows.
*Note: The beta of this company cannot be obtained because it has a price history shorter than 3 years. It will thus be set to 1 as default to calculate WACC.
Be Aware
1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest one-year quarterly average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.
For companies that report quarterly, GuruFocus combines all of the most recent year's quarterly debt data from the beginning of the year to the year-end and calculates the average.
For companies that report semi-annually, GuruFocus combines all of the most recent year's semi-annual debt data from the start of the year to the year-end and calculates the average.
For companies that report annually, GuruFocus combines the beginning and ending annual debt data from the most recent year and then calculates the average.
2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.
3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
4. GuruFocus uses the latest TTM Interest Expense divided by the latest one-year quarterly average debt to get the simplified cost of debt.
Related Terms
Applied Micro Circuits (Applied Micro Circuits) Business Description
Applied Micro Circuits Corp was incorporated and commenced operations in California in 1979 and was reincorporated in Delaware in 1987. The Company is engaged in providing silicon solutions for next-generation cloud infrastructure and data centers, as well as connectivity products for edge, metro and long haul communications equipment. Its products include the X-Gene ARM 64-bit Server on a Chip solution, or X-Gene. The X-Gene family of products targets existing and emerging hyperscale cloud, scientific and high-performance computing and enterprise applications. It also offers embedded computing products based on Power Architecture, sometimes referred to as PowerPC products. The Company's HeliX family of embedded products is based on the ARM Instruction Set Architecture. The Company's embedded processor products are deployed in applications such as control- and data-plane management, wireless access points, residential gateways, wireless base stations, storage controllers, network attached storage, network switches and routing products, and multi-function printers. The Company's connectivity portion provides high-speed, high-bandwidth, high-reliability communications products. Its connectivity products include devices for Optical Transport Network (OTN) equipment and physical layer (PHY) devices that transmit and receive signals in a very high speed serial format. Its embedded computing products are deployed in applications in markets such as control- and data-plane functionality, wireless access points, residential gateways, wireless base-stations, storage controllers, network attached storage, network switches and routing products, and multi-function printers. The Company holds approximately 348 issued patents which cover aspects of the design and architecture of its integrated circuit ("IC") and enterprise storage products. The Company's registered trademarks include AppliedMicro, AMCC, APM, X-Gene, Server on a Chip, Cloud Server, OTNsec, Arming the Cloud and Hard Silicon, among others. It is subject to a variety of federal, state and local governmental regulations related to the use, storage, discharge and disposal of toxic, volatile or otherwise hazardous chemicals that were used in its manufacturing process.
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